Schlumberger Case Tries Texas Uniform Trade Secrets Act
The Uniform Trade Secrets Act protects the trade secrets of companies and provides some legal rules for how to deal with and how to protect these secrets. On September 1st, 2013, Texas became the 47th state to put into place a state version of the Uniform Trade Secrets act.
To better understand this act, one must first understand what “trade secrets” are. Trade secrets refer to any special processes, designs, practices, or information that an organization might use that is not reasonably expected to be known by the public. For example, a particular design for a computer program might be a “trade secret.” Basically, any information held by an organization that they would like to keep secret in order to protect their product or services can be labeled a “trade secret.”
Unlike patents, trade secrets are managed at the state level, not the federal level. The Texas Uniform Trade Secrets Act is much like the general act with some minor changes that expand definitions and broaden what is considered protected. For example, Texas has expanded the definition of “trade secrets” to include information such as lists of potential customers and financial information about an organization. The Texas law also modifies the law in that it does not require that information labeled a “trade secret” be in continuous use to qualify. For example, information for a discontinued product or service, or old customer lists, would also be protected under the Texas Uniform Trade Secrets Act. In addition, this act clarifies “proper means,” meaning ways in which organizations acquire trade secrets through acceptable practices, such as reverse engineering or independent development. The act encourages organizations to completely document any information that could be considered a “trade secret” to make sure that this data has been acquired using proper means.
The very first application of the Texas Trade Secrets law involves a case between Schlumberger and National Oilwell Varco. This case involves a former Schlumberger development manager who left his position, took another position at National Oilwell Varco, and then sued his former employer over a noncompete agreement. Although the case itself does not involve trade secrets, this case and the outcome is significant because it is the first time the Texas Uniform Trade Secrets Act has been applied in the Texas supreme court. Schlumberger is arguing that corporate representatives for National Oilwell Varco should be barred from the room during the presentation of certain pieces of testimony that might reveal sensitive information in order to protect Schlumberger trade secrets. this is considered highly unusual, as a defendant is usually present throughout the trial. Whatever the Texas Supreme Court determines, their decision will set the precedent for how these types of issues will be handled in the future.
It is unlikely that Texas-specific rulings will affect trade secret laws in other states. Because the Uniform Trade Secrets Act is adopted and modified for every state, states vary greatly in ho this law is implemented and in what information is categorized as a “trade secret.”
